Free Market Foundation calls for more spectrum, defends telcos

Read time 3min 30sec

Liberal think tank the Free Market Foundation has urged government to release more spectrum and is defending mobile carriers that have been under pressure to reduce the cost of data in the country.

The organisation says if government wants free or subsidised data it should, as with the police service, provide it, or, as with housing, fund construction companies charging full market prices.

The foundation says recent recommendations by the Competition Commission (CompCom) for the operators to cut data prices by half are misplaced, adding that “by far the biggest victims of the CompCom’s misguided interference will be the poor who are entirely dependent on network investment”.

It adds: “Data is not a ‘human right’ any more than are food, clothing, transport, or medicine. Yet the CompCom, which appears not to understand contestable markets or consumer sovereignty, demands much cheaper or even free services from mobile network operators.”

The competition watchdog, which investigated data pricing in SA since August 2017, presented its final report in December, recommending that leading carriers, MTN and Vodacom, reduce data prices or face prosecution.

The CompCom said based on the evidence: “We find that price-based competition is inadequate, the challenger networks of Cell C and Telkom Mobile are unable to effectively constrain the two first movers, and that Vodacom has substantial market power, with MTN to a lesser degree.”

Vodacom and MTN have since announced their plans to reduce data prices.

However, the Free Market Foundation has now placed the blame on government, saying its failure to allocate more radio frequency spectrum is keeping the cost of data high.

The foundation says data usage has skyrocketed since the COVID-19 crisis, and “has reignited misinformed howls of rage that data in SA is too expensive”.

It cautions that operators are struggling to cope with the massive surge in demand yet, unlike in nearly all other competitive sectors, they have not increased data prices.

“Instead, they are reducing prices following the CompCom's dubious Data Services Market Inquiry report, released in December 2019.” It says mobile network operators (MNOs) are being victimised by the CompCom and public pressure, and should rather be nurtured during and after the crisis.

Last week, communications and digital technologies minister Stella Ndabeni-Abrahams announced government will issue new frequency spectrum to the country’s telecoms operators on a temporary basis to expand the network during the nationwide lockdown.

Free Market Foundation CEO Leon Louw says: “The solution to supposedly ‘high’ data prices is for government to release more spectrum, something it has failed spectacularly to do, not least due to its botched digital migration strategy. Without more spectrum, MNOs must add billions to the cost of squeezing more data into needlessly throttled bandwidth. Insufficient spectrum prevents prices from falling.

“MNOs are busy rolling out 5G. This will provide South Africans with cutting-edge services, benefitting from rapid advances in Net-based communications, entertainment and educational technologies. This rollout requires huge investments, and technical and commercial excellence.”

MTN and Vodacom have also previously urged government to release more spectrum, saying to simply lay the blame for data costs at the foot of the operators is wrong.

At the time, MTN said: “MTN in South Africa has had to compensate for the lack of spectrum by spending over R50 billion in the last five years to build a world-class network for all South Africans, covering over 95% of the population with 4G coverage, without any 4G spectrum having been allocated.”

Concurring, Vodacom said: “Vodacom has consistently stated that delayed spectrum allocation has impacted the rate at which data prices could have fallen. Vodacom has reduced the effective price of data by circa 50% since March 2016.”

See also